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Tax Time
It’s rolling around again. So I thought I’d spend a little time and remind folks about those things that can save them taxes.
If you happen to hold down a job, as well as working your crafts, you can file 2 forms:your regular 1040 or 1040a as well as the schedule C for business. There is so much, you can deduct through the business, you might just as well see how it works out. Right? :)
If you’re working out of the home, and even if you don’t but you keep books at home, you have a deduction, right there, for the business portion of the home expenses.
Uncle Sam, specifies that the space you use for tax deductions, can’t be used for anything but the business. So quarter off a section that’s just for your crafting, measure that space and claim it for the business.
From outside, measure the house and get the square footage. Then determine the square footage of your workspace (claimed). Let’s say you have a home measuring 2000 square feet and you use a small room, measuring 12X12 = 144 Square feet. Divide the 144 by 2000 to get 7%. 7% of the total overhead, is used strictly for business.
Now let’s say you burn 2 lightbulbs for an average of 2 hours per day. This takes a lot of estimating. Estimate, what percentage of the total electricity, is being used by those 2 lightbulbs. If your 2 lightbulbs is only about 10% of the total light bulbs being used in the house, then determine what percentage your lights would be for the total electrical use. Let’s say you run the dishwasher once a day, the clothes washer and dryer once a day, the vacuum once a week, the TV and average of 4 hours a day and the computer and average of 2 hours a day. I’d say those 2 lightbulbs are running somewhere in the ballpark of 2% of the total electricity. I’d take that 2% of every electric bill and claim it as a deduction.
Keep receipts for everything you use in your crafts. Right down to the scotch tape, ball point pen, paper, computer use, the gas to go get these supplies, replacement light bulbs, cleaning supplies.
Now how much do you use your car for business? Break that down to wear and tear on the car, plus the gas. It takes some brain cells but it’s worth every penny.
Now how about that lamp you use. Are you using it for the household or strictly for your crafts? If you’re using a lamp strictly for your crafts (crafts you intend to sell in your business), sign it over to the business and then depreciate it on your taxes. The table? Has it been absorbed by the business? Turn it over to ownership by the business and depreciate it.
Every penny you spend, in the name of creating for profit, is a deduction. Postage stamps, postage,and every supply or material.
If you’ve had a bad year, and spent more than you made back, you have a huge tax deduction that will lower your taxes all the more, giving you a bigger refund.
If you give something away, in the name of advertising or promotion, it’s deductible for it’s full retail value.
Put on your thinking cap, before you approach the taxes. Make a list of every piece of equipment, that is used strictly for the business: table, chair, rug,computer,paper,lamps, clamps,bottles,jars (seriously) pens and pencils, any patterns or reading materials (used for education in your niche), webpage hosting, bandaids, magnifying glasses, every hand tool….if donated by you to the business, depreciate it on your taxes.
Did you put product in a shop, the shop went out of business and you lost out on your product or any money for it….it’s a loss…list the loss. A water leak ruined your velvet? It’s a loss, list it. You went to a show and somebody walked off with one of your products without paying for it? It’s a loss, list it. You provided a sales rep with samples and he flew the coop? It’s a loss. List the full retail price.
Are you a ceramist? Do you make your own molds? Those molds have value, even if you made it yourself. That mold is a tool. Depreciate it. Make your own master blocks? That master block is not only a tool, it’s a copyright. Depreciate it. Without it, you’d lose out on business.
The point is to think as a business, not a hobbiest. If you’re in the business of selling your crafts, you’re in business. Don’t miss out of saved money.
